The Pacific Agreement on Closer Economic Relations - Plus (PACER-Plus) agreement between Australia, New Zealand and 12 Pacific Island countries was finalised in Brisbane in April 2017. The deal will likely be signed on June 14.
PACER-plus negotiations began in 2009 with 14 Pacific Island countries involved in the talks. However, the final deal did not include Papua New Guinea and Fiji, the Pacific’s two largest island economies. Both these governments have said the agreement threatens their infant industries and would not benefit their economies. Vanuatu has also pulled out of the planned signing on the 14 June, wanting more time to assess the deal before making a decision. Pacific Island, Australian and New Zealand community groups have signed a petition calling for independent assessments of the social impact of the deal in each country.
PNG and Fiji’s rejection shows that the PACER-plus agreement is heavily skewed towards the interests of Australia and New Zealand, who want lower tariffs for their exports and more rights for foreign investors. This is despite early rhetoric that the agreement was about the development needs of Pacific Islands.
AFTINET is concerned that the smaller island economies have less negotiating power than Fiji and PNG and may have been pressured by the Australian and New Zealand governments into signing a deal which does not benefit them.
Many of these are small and vulnerable economies facing many challenges, and any regional free trade agreement that covers trade in goods, services and foreign investment needs detailed research to measure the impact of trade liberalisation. Yet very few studies have looked at the effect of PACER-Plus on specific industries.
The negotiations have also been conducted in secret, making it very difficult for civil society organisations and Pacific Island communities to make a meaningful contribution to the process. However, leaked documents did reveal many issues of concern to Pacific Island civil society groups, and the Pacific Network on Globalisation published a 2015 report, Defending Pacific ways of life: A People’s Social Impact Assessment of PACER-Plus , and a 2016 Peoples' Guide to PACER-Plus.
Loss of revenue for Pacific Island nations
Pacific Island countries already have tariff-free access for their goods in Australia, so PACER-plus provides no extra market access. The main purpose of PACER-Plus is to reduce tariffs on Pacific Island imports from Australia and New Zealand and to reduce the ability of governments to regulate foreign investment in services and other sectors.
Tariff reductions would lead to significant revenue losses for smaller Pacific Island countries, and it is unclear how these losses can be offset. This could impact on the ability of these governments to provide essential services to their populations. Many Pacific Island governments are already struggling to provide public services like health, education, water, police and emergency services.
One option is to implement Value Added Taxes (VAT) as a replacement for tariffs. However, the International Monetary Fund concluded that developing countries that implement VAT only collect 30 per cent of the revenue they previously received from tariffs.
Trade in services rules could reduce governments’ ability to regulate in the public interest
PACER-plus trade-in-services rules could create pressure for privatisation and reduce the ability of governments to regulate to provide equitable access to essential services for vulnerable populations.
- People’s Guide to PACER-plus (PANG, April 2017)
- PACER-Plus trade deal without PNG and Fiji a bad idea (AFTINET, April 2017)
- Defending Pacific ways of life: A People’s Social Impact Assessment of PACER-Plus” (PANG, 2016)
Updated: May 2017